Big Banks Ready To Kick Off Next Earnings Season

The next earnings season is set to start next week when the biggest U.S. banks start to report second-quarter earnings results. JPMorgan Chase (JPM) will get things started when it reports on Tuesday, July 13. Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC) will all report on Wednesday, July 14.

On a year-to-date basis, the financial sector has been one of the top performers in the first half of 2021. Using the Select Sector SPDRs as a barometer, the energy sector gained 45% through the end of June and the financial sector rallied 25.5%. Those were the top two performances from the main sectors.

One thing that has benefitted the financial sector is the Fed expressing concerns about inflation and the possibility of rate hikes coming within the next year and a half. When interest rates rise, it helps banks as it increases the spread between lending rates and deposit rates. Investors have definitely kept that in mind as they have pushed bank stocks higher.

Second-quarter results should be interesting as they will likely blow past Q2 2020 results, but they are likely to lag Q1 2021 results. I put together the following table showing the current EPS estimates for the four banks and how the estimate compares to Q1 results and last year’s results.

The second quarter of 2020 was a rough one for most businesses with the economy shut down due to the pandemic and big banks were no exception. This is the reason for the low comps from last year and why this year’s results are so much higher. Of course, there were extenuating circumstances in the first quarter as the government was sending out stimulus checks and now Q2’s results are expected to come in below Q1’s results.

If we look at Tickeron’s Scorecard, we see some very different ratings for the banks. Bank of America is getting a “strong buy” rating at this time while JPMorgan Chase has a “buy” rating. Citigroup and Wells Fargo are both getting “sell” ratings at this time. Something to keep in mind about Tickeron’s rating system is that it is based on Artificial Intelligence and the weighting of a number of different fundamental and technical indicators.

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